GDP data for 1Q13 are scheduled for release in France, Germany and Italy next week
Last week: A recap
Data releases (US employment reports, German IP, Chinese trade data) were for the most part strong this past week (except Italian IP, which came weaker than expected), but the renewed USD strength dragged EUR-USD back below 1.31.
USD-JPY broke above 100 for the first time in over four years, amid speculation about Japanese interest for foreign bonds. Sterling showed some resilience to the downside, despite the strong USD.
"The AUD was hit by the RBA's unexpected decision to cut the interest rate, and the NZD was penalised by RBNZ Governor Wheeler’s comments that the bank intervened in the FX market to stem the currency appreciation; nevertheless, labor data in both Australia and New Zealand offered some help," says Dr. Vasileios Gkionakis at UniCredit Bank in Italy.
Lastly, the Norges Bank decision to keep the rate path steady lifted the NOK, with the SEK benefiting too.
Main drivers this next week
GDP data for 1Q13 are scheduled for release in France, Germany and Italy, and we expect EMU growth to come in at -0.1% on a qoq basis, with little impact on EUR-USD, which we think will likely remain range-bound for another week. Additionally, the BoE will release its inflation report.
"We do not expect major changes to the growth outlook, although we see some chances that the GDP forecasts for 2013 and 2014 may be trimmed somewhat; since cable momentum seems to have waned lately, we think there is the risk that the report will have a dampening effect on sterling," says Gkionakis.
UniCredit say they will take another fresh look at all our open trades this week. We maintain our longs in NZD-CHF and USD-JPY and short in EUR-PLN.
As risk assets continue to propel higher, carry trades should remain firm in the medium term and the yen should continue to weaken.
"Finally, we turn to our short-term model trading signals. This week the model recommends going long NZD, GBP, CAD and NOK against CHF, SEK and JPY," says Gkionakis.